Farm loan scheme 'admission of failure'

Rural Economy Secretary Fergus Ewing launches new loan scheme after admitting the new IT system set up to administer EU subsidies is “not there yet” and warned arrangements for the payment of 2016 subsidies are “not risk-free”

A Scottish Government loan scheme to farmers has been described as an “an admission of failure” in its management of EU subsidy payments.

Rural Economy Secretary Fergus Ewing admitted the new IT system set up to administer the payments is “not there yet” and warned arrangements for the payment of 2016 subsidies are “not risk-free”.

Mr Ewing told MSPs at Holyrood, eligible farmers and crofters can apply for a loan up to the value of 80 per cent of their subsidy entitlement as he confirmed 735 out of 18,479 eligible businesses had still not received 2015 payments.

He said “the majority of outstanding cases” are expected to be paid by the October 15 deadline.

Mr Ewing said: “There is much we have already learned from this first year of the new CAP payment regime and this experience will help to smooth the 2016 process.

“However, some parts of the programme are still being added and developed and will feature for the first time in 2016. “Our contractor CGI has assured me that the IT system functionality for 2016 will be delivered early next year and final processing will be undertaken thereafter.

“I therefore expect and anticipate that payments will be made and substantially completed between then and by the end of the payment period, namely by the end of June.”

“I'm also reassured that the arrangements we have put in place with our contractor mean that they should be able to deliver on the time-scale they have committed to for payments.

“But those arrangements are not risk-free and frankly these are not risks I am prepared to take, particularly with families' and communities' livelihoods.

“I'm therefore announcing today that every farmer and crofter who is eligible for a basic greening or young farmer payment will be able to apply for a loan up to value of 80 per cent of their entitlement.”

The levels of bank debt are the highest recorded since records began in 1972, and debt levels, when adjusted for inflation, rose eight per cent on the prior year.

In addition, farms have an estimated £1.4 billion of liabilities relating to hire purchases, lease arrangements and money borrowed from family members and other sources.

Public spending watchdogs Audit Scotland warned in May the Scottish Government could face fines of between £40 million and £125 million as a result of the “catastrophic” reform of farmers’ payments.

The CAP scheme replaced the Single Farm Payment Scheme with the new Basic Payment Scheme last year.

The grant money, which is paid as a supplement to main business income, is allocated by the Scottish Government.

Mr Ewing said farmers who applied for a loan by the October 12 deadline would receive money in November.

Government estimates suggested more than 17,000 businesses could be eligible with the potential for up to £300 million to be injected into Scotland's rural economy by the end of the year, he said.

Tory MSP Peter Chapman said Mr Ewing's admission the IT system “still doesn't work and is not expected to work until well into next year” is why some £40 million in subsidy payments are still outstanding and nine months late.

He added: “That's why he can't deliver 100 per cent of payments in December as we should expect and he has instead to offer an 80 per cent loan.